What's an IVA?

An Individual Voluntary Arrangement (also known as an IVA) is available to people struggling to repay their unsecured loans, overdrafts and credit card bills.

There are certain criteria to entry but if you live in England or Wales, have debts of around £12,000 or more and owe money to more than two different companies which you are struggling to repay then you may qualify for an IVA.

In very simple terms, an IVA allows you to payback what you can realistically afford over a fixed period of time, usually 5 years, with any sums you can’t afford to repay being legally written off. During your IVA you are legally protected from your creditors, who cannot add interest and charges to your account.

• You pay a single, affordable, monthly payment which is fair to both you and your creditors.
• Creditors are legally bound by the IVA meaning that they cannot take any recovery action against you.
• Any debt you cannot afford to repay is legally written off, often saving you a considerable amount of money.
• If you are a home owner your property is protected. However, it may be required that you re-mortgage after 3 or 4 years to release extra funds to repay creditors. Being in an IVA, your ability to obtain a mortgage may be restricted and it is likely to be on less favourable terms. If you are unable to obtain a remmortgage, the IVA can be extended for up to 12 months.

An IVA is however a serious undertaking. It isn’t for everyone and there are some downsides. For example an IVA stays on your credit report for 6 years and if you fail to adhere to the terms of the IVA creditors can take further action against you.

An IVA can only be administered by Licensed Insolvency Practitioners. The Insolvency Practitioner will charge fees for its role as the nominee and as the supervisor. A separate fee is payable for the Insolvency Practitioner's work in each of these roles. Charges may be made for various additional expenses (disbursements). An administration fee may be charged equivalent to one month's contributions.

The nominee fee is a fixed fee which is determined by the complexity of the IVA and covers the Insolvency Practitioner's pre-appointment work involved in setting up your proposal with your creditors. The typical range for nominee fee is between £1000 and £2000. Your specific IVA proposal will provide exact details of the fees being charged.

The supervisor's fee covers the Insolvency Practitioner's post-appointment work in maintaining your IVA throughout its term. The calculation of the supervisor's fee will depend on the IVA proposal and is therefore subject to your individual circumstances. the supervisor's fee is capped by creditors and is typically in the order of 15% of realisations and is paid monthly as a deduction from the monthly payment. Your specific IVA proposal will provide details of the supervisor's fee to be charged.

For more information and to find out if you qualify for an IVA, call now on 08000 481 778

Alternatively you can click here to apply for an IVA. Debtmatters offers a full assessment of your financial circumstances and advice on the options available to you. If you have debt problems there are various options for helping you make arrangements involving your creditors. The Insolvency Service has produced a guide "In Debt? Dealing with your creditors" which explains these options.